As discussed in Part 1, the first of the organizational
scorecard concepts, the Balanced Scorecard (BSC), was introduced in 1992 by
Drs. Robert S. Kaplan and D.P. Norton. This concept then spawned many other
scorecards. It is important to understand that each business is unique, and
it should decide how many perspectives will provide it with the information
to manage effectively. It is not a one-size-fits-all proposition. One may decide
on three, four, five, six, or even more perspectives for measurement purposes.
Dr. Kaplan selected four critical perspectives, so as not to overload management
with too much information. According to Dr. Kaplan, most organizations rarely
suffer from not having enough measures. Quite the contrary, they suffer from
information overload. The BSC technique focuses attention on the few critical
measures.
To effectively manage, you need to measure. Senior management understands
that the measurement system influences organizational behavior. Effective measurement
has to be predictive as well as prescriptive in nature if it is to provide information
for managing performance. Measurement is difficult because it is not an exact
science. There are no hard-and-fast rules of how to go about it. To make things
more complicated, it is difficult to foretell the impact on individual behavior,
the interactions, and interrelationships between existing diverse variables,
and the new ones produced by the new metrics. This is because people are involved,
and their actions are inherently unpredictable.
Another thing that contributes to the complexity is that often important
factors are hard to measure consistently and objectively. To effectively measure
this, variability must be designed out of the system.
The scorecard also serves to bring together into one report several important
but seemingly diverse aspects of the business, such as the external as well
as the internal focus. Any organizational scorecard will influence the thinking
of senior managers and force them to consider all the important operational
measures holistically. It also allows them to see if improvement in one area
is gained at the expense of another.
"Even the best objectives may be achieved badly," says Dr. Kaplan. Another
important aspect of the organizational scorecard is that it creates a platform
for alignment within the organization. This is important to strategy deployment,
as well as guarding against suboptimization.
Outcome, Process, and Progress Metrics
We must agree that management is about getting things done. Information is
required to accomplish this. The traditional financial measures were outcome metrics. These are historical in
nature. To manage effectively, management needs information that can predict
future outcomes. In other words, metrics that are taken today will predict what
the outcome will be in the future. These types of metrics allow for mid-course
corrections, and give management the ability to respond quickly and effectively
to changes. They also tell them if what they are doing will in fact get them
the results they expect at some future date. These are process metrics. Another set of measures
that tell managers how well they are doing or how quickly they are improving
are progress metrics. To manage effectively
all three metrics are required.
In looking at the way safety is traditionally managed, we see that there
are many similar issues with our safety metrics. For starters, our primary safety
performance metric is of the outcome measure type. Our primary benchmark is
the Bureau of Labor Statistics data where we compare ourselves to the national
average. And striving to become better than the average is not much of a challenge!
These particular measures and benchmarks do not relate to the metrics that
managers of organizations are familiar with, understand, and use to manage the
business. This misalignment creates some of the difficultly safety personnel
have in getting the attention and the resources they need. Showing success in
this arena is problematic at best.
For improvement purposes, traditionally we analyze our losses and plan to
change some aspect of the effort going forward. This analysis establishes the
improvement strategy and sets the direction for what needs to get done to improve
our loss picture and control cost of risk. This method of arriving at a strategy
may not necessarily be in alignment with the overall business goals and objectives.
This, too, creates some of the difficulty safety faces in the business environment.
Site audits become a source of information on how well the firm is doing
to implement the new strategy. This also is not in alignment with what we may
need to do, to show managers that we have the "right" strategy to get the results
we need or expect. These site audit checklists traditionally focus on the physical
environment and governing safety standards. We know from many years of experience
that most accidents are the result of "unsafe acts," so this measurement system
focuses on items that really do not particularly drive losses.
Align Safety with Business Goals
The biggest disconnect is in the area of alignment with business goals. Here,
safety suffers the greatest. One hears safety professionals bemoaning their
fate, complaining of not having management support, enough resources, or the
full backing of operational folks. They also complain that employees are not
made available or having sufficient time to receive training.
Safety personnel also see line management falling short in the implementation
and execution of the safety process. Safety metrics do not tell senior managers
how the safety effort correlates to their goals and objectives for the business.
The organizational scorecard approach, if applied to safety, will provide the
alignment, and metrics that will resolve much of the issues and concerns that
are seemingly impossible to overcome.
Ideally, the organizations should implement the scorecard technique for both
the business as well as safety. In this way, total alignment is possible. If
that is not possible, then we can implement a scorecard for safety alone. Though
this will not provide the complete alignment possible, it will provide for focused
strategy implementation, targeted interventions, as well as progress and process
metrics which are nonexistent in the present state.
Applying Scorecards to Safety
So how do we apply the balanced scorecard technique—or for that matter any
other scorecard—to safety? If the business has implemented an organizational
scorecard process, then it would make sense for the safety perspectives to be
aligned with them. Let us assume that the business has adopted the four business
perspectives proposed by Dr. Kaplan:
- The customer perspective
- The internal business perspective
- The innovation and learning perspective
- The financial perspective
The comparable safety perspectives might be:
- The stakeholder in safe work performance—This
is everyone, all levels of management as well as the workers.
- Safety process and procedure—Everything
that is done to make safety "work": programs, training, audits, employee
management, risk planning, etc.
- Innovation in safety—Technological
innovation, skill, and knowledge improvement, alignment, etc.
- Safety performance management—Operational
excellence, leadership, empowerment, performance standards, performance
measurement, etc.
So how do we go about accomplishing this? For example, assume that the vision
we have for our safety effort is "an injury-free workplace." The next step is
to identify strategies, objectives, measures, and targets for each of the above
perspectives. The organizational scorecard places vision and strategy at the
center. This process establishes goals that ensure everyone within the organization
will adopt behaviors and take the actions that will achieve these goals. The
measure is also designed to ensure this occurs and provides an assessment of
how everyone is doing in accomplishing the central vision. Senior management
now has a process that effectively focuses all the efforts of the organization
toward the vision and has the information with which to manage effectively.
A Holistic Approach
Excellence in safety can only be achieved though a strategy-driven, performance-based
safety management process. The question is now how can we devise a safety process
that will enable us to take advantage of the organizational scorecard to impact
safety performance? Obviously, we need to approach the whole thing holistically.
Safety should be fully integrated into the organization's operations, and safety
outcomes should be aligned with business goals. Therefore, the safety process
will become woven into the very fabric of the organization.
The framework for stellar safety performance is made up of three cornerstones:
- Technical aspects
- Management techniques
- Innovative strategies
Technical Tools
The first element of the technical tools is an effective safety program whereby
all the safety standards are adhered to 100 percent of the time. The program
should have sound engineering practices, state-of-the-art education, and audits
that will be conducted to ensure that policies and procedures are followed.
The second element requires that specialized safety programs be written to
address the unique requirements of the business. These might include a substance
abuse program, an automobile fleet program, a wellness program, etc.
The third element of this cornerstone is risk assessment and preoperational
planning. This is by far the most important element in this cornerstone. The
identification of risk and the planning of the operations so as to effectively
deal with the risk is a critical activity that all levels of management should
engage in.
Management Techniques
There are three elements associated with this cornerstone. The first is resource
management. This means the organization must provide the finances and time required
to educate and protect its employees.
The second element is performance management. This includes such things as
goals and objectives, setting performance measurement standards, establishing
accountability, etc.
The third element is measurement. This area deals with how performance is
measured and what targets it is to be compared to. There are a number of measures
the organization can use. These include input, output, process, progress, and
outcome measures. Input, progress, and process measures are predictive and provide
information with which to affect change. Outcome and output measures are historical
and indicate results.
Innovative Strategies
There are four elements in this cornerstone. The first deals with the organizational
systems and business processes and procedures. This element analyzes the systems
to identify barriers, pinch-points, and anything that will foster inefficiency
or drive unwanted behavior. This element also strives for continuous improvement.
The second element is behavioral interventions. This element looks at the
behaviors of individuals and tries to identify the underlying drivers of these.
Through system change or consequence management this element tries to change
organizational behavior.
The third element is innovation and learning. Change is the only constant
in business today. Therefore, for the organizations to thrive, it must become
a learning organization. It must identify changes in the environment and react
to those changes.
The last element is culture and leadership. Herein lies the very essence
of the organization. The values, vision, and strategies devised by the leadership
ultimately impact everything the organization does, achieves, and becomes.
In reviewing the 10 elements, one sees that only the technical cornerstone
really falls into the safety area. The rest are a part of the way the organization
is structured and goes about doing business. The only way to truly manage the
risk of incidents, injuries, and losses involving the company's workforce requires
an analysis of the means and methods, the planning and systems, as well as the
behaviors and leadership within the organization.
References:
Kaplan, R.S. and Norton, D.P., "The Balanced Scorecard—Measures that Drive
Performance." Harvard Business Review (Jan.—Feb. 1992): 71-79.
---, "Putting the Balanced Scorecard to Work." Harvard Business Review (Sept.—Oct. 1993):
71-79.
---, "Using the Balanced Scorecard as a Strategic Management System." Harvard Business Review (Jan.—Feb. 1992):
75-85.
---, "The Having Trouble with Your Strategy? Then Map It." Harvard Business Review (Sept.—Oct. 2000):
3-11.
Note: The illustrations,
instructions, and principles contained in the material are general in scope
and, to the best of our knowledge, current at the time of publication. No attempt
has been made to interpret any referenced codes, standards, regulations, principles,
or concept. All of this information is public knowledge, and readily available
in books and trade journals.